Here are Novell's Objections to SCO's Supplemental Jury Instructions [PDF], as text, thanks the now-quite-weary Steve Martin. There were so many little details to get just right in this document. As instructed by Judge Dale Kimball, Novell followed this format: first, for each of SCO's proposed instructions, Novell reproduced it in full, underlining the portions it objected to, then adding annotations explaining the objections, and, where applicable, offering an alternative instruction.

SCO wants to keep as much of the money it took in from licenses since it began its anti-Linux campaign as it can, and it framed its jury instructions to try to achieve that goal, but unfortunately for SCO, Judge Dale Kimball has now told them as of Friday that there will be no jury and that he isn't going to entertain any rehash of matters he's already ruled on on August 10, which wipes away a lot of what SCO was striving for, and one must assume they'll follow his directive to save all that for the appeal. Their proposed jury instructions do give us a hint as to at least part of what SCO is likely to tell the appeals court.

One of the rulings the judge made was that "SCO was required to account for and pass through to Novell the appropriate SVRX Royalties according to the SVRX portions of [the] Agreements." This trial is about how much SCO owes Novell from the Sun and Microsoft license money, which the judge has already said are SVRX licenses, and he's also ruled that SCO owes Novell for any other SVRX money. The question now is, what about the other licenses, like the EV1 license? Are the SCOsource Linux licenses SVRX licenses too? And if so, to what degree?

Also to be determined at trial is whether SCO had the right to enter into the licenses in the first place. SCO has a theory that if the licenses were for UnixWare with some incidental SVRX elements, they get to keep the money. Footnote 4 responds to that from Novell's perspective:

4 A determination whether the SCOsource agreements licensed SVRX "incidentally" to UnixWare is not significant here, but is key to Novell's claim seeking a declaration that SCO lacked authority to enter into the Sun, Microsoft and SCOsource Agreements. (See Novell's Objection to Proposed Instruction on Lack of Authority Declaration.) SCO has the legal authority to enter into licenses that license SVRX incidental to UnixWare. In such circumstances, it must nevertheless remit SVRX Royalties resulting from those licenses. "Incidental" is quite relevant to the first inquiry (legal authority to enter into a license) and irrelevant to the second (obligation to apportion revenue).

So SCO owes for any SVRX licensing money no matter what; if the licenses were UnixWare licenses, with only incidental SVRX portions, then they had the right to enter into them but they still owed money from the SVRX portions, Novell is saying; but if they were dominantly SVRX licenses, they needed to seek Novell's approval, which SCO didn't do. And if SCO lacked the authority to enter into the licenses, whose money is that?

Here's the Asset Purchase Agreement, or APA between Novell and Santa Cruz in 1995, which is referenced throughout. You'll find all the amendments on Groklaw's Contracts page, under Novell and under Santa Cruz. We can't see the Sun and Microsoft agreements, although we've heard quite a lot reported about they were for -- here's a link to an article from July of 2003, which said Sun's license was to permit "Sun to use some software from Unix System V Release 4 for software components called drivers". And here's what SCO told the SEC about those two licenses in their S-3 filing dated July 8, 2003:

One of the assets we acquired from Tarantella was all right, title and interest in and to UNIX and UnixWare, including source code and intellectual property rights. UNIX System V was initially developed by AT&T Bell Labs and over 30,000 licensing and sublicensing agreements have been entered into for the use and distribution of UNIX. These licenses led to the development of several derivative works based on UNIX System V, including our own SCO UnixWare and SCO OpenServer, Sun's Solaris, IBM's AIX, SGI's IRIX, HP's UX, Fujitsu's ICL DRS/NX, Siemens' SINIX, Data General's DG-UX, and Sequent's DYNIX/Ptx. These operating systems are all derivative works based upon, or modifications of the original UNIX System V source code currently owned by us. As such, we retain the right to control certain uses of all UNIX-based derivative works and to prohibit use of UNIX and UNIX-based derivative works for others and to prohibit the unauthorized disclosure of UNIX and UNIX-based derivative works to third parties, including open source developers.

We initiated the SCOsource effort to review the status of these licensing and sublicensing agreements and to identify others in the industry that may be currently using our intellectual property without obtaining the necessary licenses. This effort resulted in the execution of two license agreements during the April 30, 2003 quarter. The first of these licenses was with a long-time licensee of the UNIX source code which is a major participant in the UNIX industry and was a "clean-up" license to cover items that were outside the scope of the initial license. The second license was to Microsoft Corporation ("Microsoft") and covers Microsoft's UNIX compatibility products, subject to certain specified limitations. These license agreements are typical of those we expect to enter into with developers, manufacturers, and distributors of operating systems in that they are non-exclusive, perpetual, royalty-free, paid up licenses to utilize the UNIX source code, including the right to sublicense that code.

While specifics on the Microsoft and Sun agreements may be discerned only through a glass darkly, there are certainly enough versions of the IP License for Linux for us to ponder though, not that they always called it that, such as the one EV1 signed in early 2004. Here are all the iterations that we have on Groklaw:

EV1 Agreements and attached as Exhibit 2, the August 2003 SCO press release announcing the Intellectual Property License for Linux [text; comparative chart of the two EV1 versions, including the version signed]

As you can see without even reading them, even the titles kept changing. So did the wording. The question at trial is going to be which bucket does this type of license go into? If those licenses were about Unix System V, SCO will owe at least some of the money it got from folks like EV1 to Novell. That is what the trial is now about, that and precisely how much of the Sun and Microsoft money is due to Novell and whether SCO had the right to enter into those agreements without Novell's approval in the first place. Oh, one more -- the wording on the "legal notice" SCO posted on its ftp site regarding its continued allowance of Linux downloads for prior customers read like this:

"NOTICE: SCO has suspended new sales and distribution of SCO Linux until the intellectual property issues surrounding Linux are resolved. SCO will, however, continue to support existing SCO Linux and Caldera OpenLinux customers consistent with existing contractual obligations. SCO offers at no extra charge to its existing Linux customers a SCO UNIX IP license for their use of prior SCO or Caldera distributions of Linux in binary format. The license also covers binary use of support updates distributed to them by SCO. This SCO license balances SCO's need to enforce its intellectual property rights against the practical needs of existing customers in the marketplace.

"The Linux rpms available on SCO's ftp site are offered for download to existing customers of SCO Linux, Caldera OpenLinux or SCO UnixWare with LKP, in order to honor SCO's support obligations to such customers."

SCO has commenced providing notification to selected Fortune 1000 Linux end users outlining additional violations of SCOs copyrights contained in Linux. Certain copyrighted application binary interfaces have been copied verbatim from the UNIX System V code base and contributed to Linux without proper authorization and without copyright attribution. Any part of any Linux file that includes the copyrighted binary interface code must be removed. This ABI code was part of a 1994 settlement agreement involving the University of California at Berkeley and Berkeley Systems Development, Inc., (BSDI).

The letter states: Distribution of the copyrighted ABI code, or binary code compiled using the ABI code, with copyright management information deleted or altered, violates the Digital Millennium Copyright Act codified by Congress at 17 U.S.C. §1202. DMCA liability extends to those who have reasonable grounds to know that a distribution (or re-distribution as required by the GPL) of the altered code or copyright information will induce, enable, facilitate, or conceal an infringement of any right under the DMCA.

The letter also states, In addition, neither SCO nor any predecessor in interest has ever placed an affirmative notice in Linux that the copyrighted code in question could be used or distributed under the GPL. As a result, any distribution of Linux by a software vendor or a re-distribution of Linux by an end user that contains any of the identified UNIX code violates SCOs rights under the DMCA, insofar as the distributor knows of these violations.

That is clearly talking about code that SCO can't claim, since it relates it to the BSDi settlement in 1994, and Judge Kimball has already ruled that Novell retained the UNIX and UnixWare copyrights it had when it sold to Santa Cruz under the APA in 1995. The UnixWare back then was a joint project of Novell and USL, all of which went to Novell by 1993. If SCO was selling licenses to that code, and promising not to sue over copyright infringement of that code, I'd say it was selling something it didn't own and threatening to sue people it had no legal authority to sue. I can't see the judge deciding that it should get to keep *that* kind of money.

Presumably there could be a fair amount of money at stake, since, while EV1 was the first to sign on for whatever those licenses for Linux users were for, in March of 2004, Blake Stowell, then the PR guy at SCO, said there were between 10 and 50 such licensees. If that was true, and one must assume he was being truthful, given SEC oversight and all, then it's certainly worth it to Novell to get to the bottom of all this and try to figure out what these licenses were actually for. I'm not a lawyer or a judge, so I don't have to speak with their level of precision, so I'll just call those licenses "stick 'em up, Linux" licenses. That was the part that was crystal clear always: SCO wanted our money:

The gloves are now officially off -- all enterprise Linux users have to pay The SCO Group Inc. new licensing fees to use Linux, or they could find themselves on the wrong end of a copyright infringement lawsuit.

That was the ultimatum laid out today by SCO CEO and President Darl McBride, who said that the $3 billion lawsuit against IBM in March was apparently just the start of his company's march to defend itself from what it sees as rampant theft of its Unix System V intellectual property (IP).

"We agree on the point that this case started out as a contracts case against IBM. As of today, it's a different game," McBride said today in a conference call with reporters and analysts.

"SCO's Unix IP has been misappropriated into Linux," he said. "SCO is giving customers [of any Linux distribution] the opportunity to run Linux legally." ...

Lindon, Utah-based SCO also announced today that it has now received copyrights for its System V code .... The company had never before officially filed for the copyrights, which it needed to do as a procedural step while it pursues its legal case against IBM, McBride said.

System V, the man said. That's what it needed to register to sue IBM and the world. However, the article goes on to mention that what SCO was offering Linux users was a "special" license it called a UnixWare license:

The specially tailored SCO UnixWare 7.1.3 licenses will support runtime, binary use of Linux for all commercial users of Linux based on kernel Version 2.4.x and later, according to the company. Buying a license would allow users to comply with SCO's copyrights, the company said, adding that if enterprise Linux users do so, SCO won't pursue legal challenges against them related to the code.

So they did mention UnixWare in connection with the Linux licenses, at least in the name of the license.

What Were SCOsource licenses for?

Let's look at what they told us at the time. As this Internet News article shows, the alleged infringements mentioned that same day at the teleconference were the following:

The company said Linux's Symmetrical Multi-Processing (SMP) capabilities, which are essential to making Linux an enterprise-grade operating system, are derived from Unix System V and its derivative works (like IBM's AIX). McBride claimed SCO has found three distinct areas of infringement:

Direct line-by-line code taken from SCO's Unix System V, which he noted made its way into Linux from various vendors, "primarily other than IBM"

Direct line-by-line code taken from derivations of Unix System V code, like IBM's AIX; McBride noted that its contracts with Unix vendors prevent those companies from donating any code based on or derived from the Unix System V kernel

Non-literal infringement which stems from code which borrows from the concepts and structure of Unix.

Despite speculation that some of the alleged infringing code may have come from BSD (at one point, System V code borrowed from 4.4BSD, removing attributions and copyrights), McBride said that is not the case.
"We're not talking about BSD code," he said. "We're talking about high-end SMP code that has been donated in the past year or two and has not made the rounds through BSD."

So the direct line-by-line copying, they said, was System V. But when they showed people the code under NDA, they talked about UnixWare. UnixWare was SCO's equivalent Unix product like AIX was IBM's, so maybe that was just because that was the handiest way to show it. But since McBride mentioned System V and UnixWare, which was the license for? If you go to Groklaw's transcript of the teleconference that day, July 21, 2003, we can figure it out and resolve the confusion:

Operator:
Our next question comes from Dean Takahashi with San Jose Mercury News.

Takahashi:
Hello, I had a couple of questions. Can you more completely describe
the offending code and its origins and, you know, like when it got put
into Linux by what party, you know. And then also what kind of cost is
there associated with getting a valid license for the customers.

McBride:
Yeah, with respect to the infringing code, the ... we see, of the three
different types that are out there. You have the direct, line by line
code that is showing up in there, and it's very stark. When you lay
down the UnixWare code base, and you lay down the Linux code base,
and you look at them straight across, you can see absolute 100 direct
line by line copying that's taken place, including developer comments,
errors, typos that were in the developer comments, you know, and so it's
very stark. That type of code has come from various vendors, and that
type of code is coming from vendors primarily other than from IBM.

[13:30]

With respect to the next category of code we would call the derivative
works area, we're seeing a lot code that has come in in just the last
year or two, and that has to do with a lot of the SMP, high-end scalable
technologies, the NUMA technologies or non-uniform memory access, RCU,
read copy update. All of these are technologies that allow you to really
take a multi processor configuration and go big time with it. In the
early days of Linux and the 2.2 kernel, before it really grew up, you
would get two to four processors running simultaneously. And now when
we go to 2.4 kernel, you see 16-way, 32-way configurations. With the
new 2.6 kernel coming out, it even jumps up higher that that. So you
see incredible, enterprise level scalability going on.

Now the other thing that's interesting here is when you compare the
amount of source code that was contributed by vendors,
in 2.2 kernel versus 2.4 which just came out a couple of years ago
you see in the 2.2 area, there was literally no contributions, and
since 2.4 has come out, the number of files -- not just lines of code
-- but the number of files that has been contributed by our Unix
vendors is in the hundreds.

So, that's the second bucket, and then the third bucket is one of
non-literal infringing areas of methods and concepts that are still
protected under our rights, and that's a broader bucket beyond the
first two.

So while the line-by-line copying here is said to be seen if you lay UnixWare side by side next to Linux, not that any of it ever showed up in court, by the way, that isn't the biggest part of what they claimed; the biggest bucket was "methods and concepts", not literal code copying, and I think one would be hard pressed to trace that anywhere but to UNIX itself. That indicates to me that the Linux licenses were not primarily for UnixWare, despite calling it a UnixWare 7.13 license, even if we attributed every bit of bucket one to UnixWare, and from this statement alone, I don't think you can. The middle bucket, as the transcript goes on to show, would be the Dynix et al bucket. And that's about System V too, not UnixWare, because those licenses with the vendors were System V licensees:

Operator:
We'll go next to Gordon Haff with Illuminata.

Haff:
Hi there. I have a question around the derivative works.
Is SCO contending that any contributions from
the various Unix OS vendors are inherently infringing,
even if the code in question was entirely developed by
the Unix vendor?

McBride:
No, not at all. We are very clear on, there's ...
if you look at the Linux kernel between 2.2 and 2.4, it jumps from
a couple of thousand files up to over 5,000 files, and a large
increment jump or large reason for the jump there is the
huge number of files that came from vendors that we do have System V
source code licenses with.

Now, just because there are thousands of new files showing up from
vendors doesn't inherently create a problem with us. But, when
we take very clearly works that are protected under our derivative
works -- so, in other words, when they take a development path on our
System V kernel and expand that and create a derivative work, and
then turn around and donate it, that is where it creates the problem,
and that's the area where we are saying that we have hundreds of files.

Now if there are thousands of files that have come from vendors,
we're saying there are hundreds that we deem to be under these
protective clauses on our derivative works.

It would appear, then, that at least on the day the licenses were announced, UnixWare wasn't the dominant issue by a long shot, if it was the source of any of the code. The press release announcing the teleconference didn't even mention UnixWare, only Unix and copyrights and Linux. And when SCO complained about SGI code, it stated it was System V code.

Why call it that, then, UnixWare 7.1.3 for the Linux license? I am only guessing, but I'd opine that they were aware that UnixWare royalties stayed with them. Just a passing stab in the dark. Or maybe this gives us a hint:

McBride:
On the financial side of this, clearly the copyright protection we get
here is significant in terms of the value to our company. The ability
to seek injunctive relief and damages relief from end users all the way
down to the amount of the ... the price of the product that you would
have sold for the similar infringing product is pretty significant when
you take the over two million servers that are in the marketplace today
-- on just the 2.4 kernel according to IDC -- and you multiply that out
against a UnixWare type of a pricing model. Obviously this becomes a
multi-billion dollar problem.

Want to hear a great question from a journalist? Stephen Shankland then asked this:

Shankland:
I was wondering, earlier you argued that "No, no, no, we're still a
products company, all this intellectual property stuff is just a
sideline, we're not just becoming an IP shop," but particularly in
light of ... this action today and the fact that Linux has succeeded in
the marketplace, where UnixWare has pretty much faded into almost
complete obscurity, it certainly seems to me that you're becoming more
of an IP shop. I'm wondering if you would agree with that assessment
when you talk about, you know, potential in capturing UnixWare revenue off the
Linux install base, it seems to me that that would be far more
significant than your UnixWare or OpenServer revenue.

Or maybe SCO never really knew what it was selling as far as any tie to particular code. Remember when Ian Taylor signed the NDA and went to Utah to look at the code?

Unfortunately, SCO was willing to show me only one example. I was shown a source file Sontag said was from SVR4, which was compared to a source file from Linux. The identical portions of the code were highlighted. There were indeed substantial similarities in the code: very similar comment text, the same variable names, the same algorithm. There also were some differences, but it seemed quite plausible that both pieces of code came from the same source.

SCO refused to show me the revision history of the Unix file. I pointed out this made it impossible to judge the order of derivation; SCO agreed, and said it was a matter of discovery for the court case. SCO said it is confident the code had not appeared in BSD and was developed internally at AT&T and successors.

As you can see, SCO admitted it didn't know back then where the code came from. It was a matter of doing discovery to find out, but they were pretty sure it came from SVR4. So, there you have it. They did their discovery -- and how -- and it's now time to sort all the pieces out at trial with Novell. September 17. What exactly was SCO selling? From this collection of research, it's looking to me like SCO owes Novell a goodly portion of the SCOsource license money, if not all of it.

First, SCO's instructions largely reflect SCO's effort to
relitigate issues this Court disposed of at the summary judgment
stage. As such, they are inherently improper. See Echo
Acceptance Corp. v Household Retail Servs., 267 F.3d 1068 (10th
Cir. 2001) (trial court properly denied defendant opportunity to
present argument, evidence or jury instructions on defenses
rejected as a matter of law on summary judgment). In Echo,
the Tenth Circuit rejected a similar attempt by a defendant, HRSI,
whose statute of frauds defense was determined by the trial court
to be inapplicable as a matter of law. In addition to barring HRSI
from "press[ing] its statute of frauds argument to the jury[,]",
the Tenth Circuit held that the trial court properly rejected
HRSI's proposed instruction on another theory of defense foreclosed
on summary judgment, despite HRSI's "attempt[] to resurrect that
theory at trial." Id. at 1079, 1087. Accordingly, where SCO
seeks to "resurrect" an issue definitively addressed in this
Court's August 10, 2007 Memorandum Decision and Order ("Order"),
Novell objects that the proposed instruction must be rejected.

Second, and closely related, SCO's jury instructions seek to
confuse or mislead the jury about what the Court has already
determined. Again, as such, they must be rejected. Dillard &
Sons Constr., Inc. v. Burnup & Sims Comtec, Inc., 51 F.3d
910, 915 (10th Cir. 1995) (instructions "may not serve to mislead
the jury in any way"); Baer Bros. Land & Cattle Co. v.
Palmer, 158 F.2d 278, 280 (10th Cir. 1946) ("purpose [of jury
instructions] is to plainly guide the jury to a solution of issues
often difficult and involved, and to prevent the jury's being
confused or misled"). This Court's determination of certain issues
not only circumscribes the issues that are left for the jury to
determine but is highly pertinent to the jury's ability to
understand the issues and assess the evidence. Failing to instruct
the jury fully and accurately on what the Court has already found
in this case carries a risk that the jury will reach
inconsistent

1 (2)

conclusions and should not be sanctioned. See, e.g., Sulzer
Textil A.G. v. Picanol N.V., 358 F.3d 1356, 1366 (Fed. Cir.
2004) (trial court has duty to instruct the jury specifically on
its pretrial claim construction rulings to insure that jury is not
"left free to apply its own reading of disputed terms" that have
already been determined). Accordingly, where SCO seeks to ignore or
obscure an issue addressed in the Court's August 10, 2007 Order,
Novell objects that the proposed instructions must be rejected.

In accordance with the Court's Pretrial Order, Novell has
reproduced SCO's proposed instruction in full and has underlined
objectionable portions, with annotations explaining the objections
below the instructions. Where applicable, Novell has proffered an
alternative instruction.

Novell's objections to these instructions are advanced without
prejudice to Novell's motion to strike SCO's jury demand on the
grounds that the claims remaining for trial call for equitable
relief.

2 (3)

SCO'S PROPOSED INSTRUCTION  BREACH OF CONTRACT

Novell's Third Count for Relief alleges that SCO breached the
APA by failing to remit royalties purportedly owed to Novell.

A failure to perform a contract is a breach. [1]1In order to
prove its claim for breach of contract, it is Novell's burden to
prove, by the preponderance of the evidence, all of the following
elements:

The existence of a contract between Novell and SCO;

Novell's performance;

SCO's unjustified failure to do something that the contract
required it to do; and

Damages to Novell caused by the breach.

[2]In this case, the parties dispute whether SCO was
required to remit to Novell the payments it received from the
SCOsource Agreements.

[3]You must therefore determine what payments SCO was
required to remit to Novell under the APA, and what payments it was
entitled to keep for itself. Section 4.16 of the APA provided
that SCO had to remit to Novell only royalties that SCO received
from SVRX Licenses. You must determine whether the SCOsource
Agreements constituted SVRX Licenses upon which Novell retained
royalty rights.

[4]If you determine that Novell has not proven by the
preponderance of the evidence that the SCOsource Agreements were
SVRX Licenses upon which Novell retained royalty rights, then you
must find that SCO did not breach the contract. If you determine
that Novell has proven by the preponderance of the evidence that
the SCOsource Agreements were SVRX Licenses upon which Novell
retained royalty rights, then you should that SCO is liable for
breach of contract.

3 (4)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

Novell objects to SCO's proposed breach of contract instruction
on the grounds that no jury instruction is necessary because Novell
should be permitted voluntarily to withdraw this claim on the
grounds that it is duplicative on Novell's other claims and will
simply waste judicial resources and jurors time to try it.
(See Novell's Motion to Voluntarily Dismiss Its Third Claim
for Relief, filed August 24, 2007, Docket No. 388.)

Novell further objects to SCO's proposed breach of contract
instruction on the grounds that it suggests that the jury will
determine issues that have already been decided in this case as a
matter of law. For example, SCO's proposed instruction suggests
that it is still an open issue whether Novell had a contract with
SCO and whether Novell performed under that agreement. At this
point, however, the APA's ability to bind the parties and Novell's
performance under it are not at issue. This Court's August 10, 2004
Order established as a matter of law that the APA "expressly
created an agency relationship between the parties with respect to
SVRX Royalties" and that SCO breached its fiduciary duty to Novell
under the APA. (Order at 89, 96.) SCO's proposed instruction
further suggests that the jury will determine what payments SCO was
obligated to make to Novell under the agreements. To the contrary,
the Court has established as a matter of law that "SCO was required
to account for and pass through to Novell the appropriate SVRX
Royalties according to the SVRX portions of [the] Agreements."
(Order at 96) Accordingly, the only issue for the jury to determine
is whether royalties collected under the SCOsource licenses are
also SVRX Royalties.

SCO's proposed instruction does not inform the jury that the
Court has already determined that SCO was Novell's agent with
respect to collecting SVRX Royalties, or that the Court has already
determined that SCO was required to account for and pass through
SVRX Royalties. Indeed, SCO's proposed instruction leaves open the
possibility that the jury could

1 (5)

find that SCOsource licenses are SVRX licenses within the
meaning of the APA and still find that SCO was not required
to convey the royalties collected under those licenses to Novell.
The instruction thus permits the jury potentially to ignore the law
of the case, and must be rejected.

Specific Line Objections

[1] Novell objects to the portion of SCO's proposed
breach of contract instruction that lays out the elements of a
breach of contract case, including the necessity of finding that
contract exists and that the plaintiff has performed. It is not
clear why SCO has proposed an instruction from the "BAJI" set of
instructions which have been replaced in California by the "CACI"
instructions, cited elsewhere by both Novell and SCO. See
William E. Wegner et al., Cal. Prac. Guide: Civ. Trials & Evid.
14:58 (Judge Eli Chernow (Ret.) ed.) ("Use of the Judicial Council
instructions [e.g. CACI] is strongly encouraged" and
"recommended"; "judges are likely to stick to Judicial Council
instructions whenever possible") (emphasis in original) (citing CRC
855(e)). As the CACI instructions note, however, "In many cases,
some of the elements [of a breach of contract claim] may not be
contested. In those cases, users should delete the issues that are
uncontested so the jury can focus on the contested issues."
Annotation to CACI 303 ("Breach of Contract  Essential
Factual Elements"). Here, there is no dispute that the contract
existed and there has never been any dispute that Novell is
entitled to enforce it. This Court has already determined, as a
matter of law, that the APA required SCO to account for and remit
SVRX Royalties to Novell, and has rejected, as a matter of law,
that the term SVRX Royalties has the narrow meaning SCO ascribed to
it. Accordingly, the only legitimately contested issue for trial is
whether the SCOsource licenses included SVRX Royalties. Suggesting
otherwise will confuse and mislead the jury regarding the scope of
its decision and as such is improper.

[2] Novell objects to the portion of SCO's proposed
breach of contract instruction stating that in this case "the
parties dispute whether SCO was required to remit to Novell the
payments it received from the SCOsource Agreements." This Court has
already determined, as a matter of

2 (6)

law, that the APA required SCO to account for and remit SVRX
Royalties to Novell, and has rejected, as a matter of law, that the
term SVRX Royalties has the narrow meaning SCO ascribed to it.
Accordingly, the only issue for trial is whether the SCOsource
licenses included SVRX Royalties. Suggesting otherwise will confuse
and mislead the jury regarding the scope of its decision and as
such is improper.

[3] Novell objects to the portion of the proposed
instruction stating that they jury's job is to "determine what
payments SCO was required to remit to Novell under the APA, and
what payments it was entitled to keep for itself." This Court has
already determined that SCO was required under the APA to account
for and remit SVRX Royalties, and has rejected SCO's effort to
narrow that obligation to existing binary agreements. Moreover,
this Court has already determined that the Sun and Microsoft
agreements included royalty payments SCO was required to remit to
Novell under the APA. Suggesting to the jury that it has unfettered
discretion to determine what payments SCO was required to remit to
Novell under the APA is error that must be avoided.

[4] Novell objects to the portion of this instruction
suggesting that the jury will determine whether or not SCO is
"liable for breach of contract." This Court has already established
as a matter of law that SCO is liable for breach of contract for
failing to account for SVRX Royalties in the Sun and Microsoft
agreements. (Order at 96 ("the court concludes SCO was required to
account for and pass through to Novell the appropriate SVRX
Royalties according to the SVRX portion of the 2003 Sun and
Microsoft Agreements"); 97 ("SCO's conduct also amounts to a breach
of fiduciary duty, conversion, unjust enrichment, and breach of
express contract, all of which are sufficient 'wrongful conduct' to
impose a constructive trust.").) Accordingly, SCO is "liable for
breach of contract" in this case whatever the jury's findings on
the SCOsource licenses, and it is misleading to instruct
otherwise.

3 (7)

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed jury instruction on the grounds
that it fails to instruct the jury that the Court has already
determined the following issues, each of which is pertinent to the
jury's consideration of this claim:

"The APA expressly created an agency relationship between the
parties with respect to SVRX Royalties." (Order at 89);

"The use of the defined term SVRX License in [Amendment No. 1
of the APA] demonstrates that even incidental licenses of SVRX are
considered an SVRX License." (95);

"SCO was required to account for and pass through to Novell the
appropriate SVRX Royalties according to the SVRX portions of the
2003 Sun and Microsoft Agreements." (96);

"To the extent that SCO has failed to pass through the
appropriate amount of SVRX Royalties under the 2003 Sun and
Microsoft Agreements to which Novell was entitled, Novell is also
entitled to summary judgment on its [claim] for conversion."
(96);

"SCO's conduct also amounts to a breach of fiduciary duty,
conversion, unjust enrichment, and breach of express contract, all
of which are sufficient 'wrongful conduct' to impose a constructive
trust." (97);

"Furthermore, the court concludes, as a matter of law, that the
only reasonable interpretation of the term 'SVRX License' in the
APA is all licenses related to the SVRX products listed in Item VI
of Schedule 1.1(a) to the APA." (100);

"[T]he court concludes, as a matter of law, that the only
reasonable interpretation of all SVRX licenses include no temporal
restriction of SVRX Licenses existing at the time of the APA."
(100-01);

4 (8)

"[T]he court also notes that SCO has a continuing contractual
obligation to comply with the accounting and reporting requirements
set forth in the APA." (101).

A party breaches its contractual obligations to another party
when it fails to do something that the contract between them
required it to do. Here, Novell alleges that SCO breached its
contractual obligations under the APA when SCO failed to pay to
Novell the SVRX Royalties to which Novell was entitled.

You are instructed that SCO was contractually obligated to pass
through to Novell the SVRX Royalties that SCO collected under any
of the SVRX Licenses into which it entered. You are further
instructed that SCO breached this obligation when it failed to
remit to Novell the SVRX Royalty payments from the 2003 Sun and
Microsoft Agreements. Therefore, you need not determine this
issue.

Novell alleges that, in addition to the Sun and Microsoft
agreements, SCO breached its obligations under the APA by failing
to remit other SVRX Royalties to Novell. Once again, this claim
relates to SCO's "SCOsource" agreements. To prevail on its breach
of contract claim as to the SCOsource agreements, Novell must prove
only that SCO collected some amount of money based on the SCOsource
agreements that relates to SVRX. It is undisputed that SCO had an
obligation under the APA to remit such amounts to Novell. It does
not matter whether SCO knowingly or intentionally kept royalties
owed to Novell for purposes of this claim.

[6]In this case, the parties dispute whether Novell
had a right to possess payments from the SCOsource
Agreements.

[7]You must therefore determine what payments Novell
was entitled to possess under the APA, and what payments SCO was
entitled to keep for itself. Section 4.16 of the APA provided
that Novell was entitled to possess only royalties that SCO
received from SVRX Licenses. You must determine whether Novell has
proven that the payments from the SCOsource Agreements constituted
payments that Novell was entitled to possess under this provision
of the APA.

[8]If you determine that Novell has not proven by the
preponderance of the evidence that the payments from the SCOsource
Agreements were payments that Novell was entitled to possess under
the APA, then you must find that SCO is not liable for conversion.
If you determine that Novell has proven by the preponderance of the
evidence that the payments from the SCOsource Agreements were
payments that Novell was entitled to possess under the APA, then
you should find that SCO is liable for conversion.

7 (11)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

SCO's proposed conversion instruction suggests that because the
status of the SCOsource licenses remains to be tried, the parties
must relitigate issues that have already been decided as a matter
of law on summary judgment. In particular, SCO's proposed
instruction suggests that it is still an open issue whether Novell
was entitled to possession of SVRX Royalties collected by SCO. To
the contrary, the Court's August 10, 2007 Order established as a
matter of law that "SCO was required to account for and pass
through to Novell the appropriate SVRX Royalties according to the
SVRX portions of [the] agreements." (Order at 96.) Accordingly, the
only issue for the jury to determine is whether royalties collected
under the SCOsource licenses are also SVRX Royalties.

SCO's proposed instruction does not inform the jury that Court
has already determined that SCO was Novell's agent with respect to
collecting SVRX Royalties, or that the Court has already determined
that SCO was required to account for and pass through SVRX
Royalties. Indeed, SCO's proposed instruction leaves open the
possibility that the jury could find that SCOsource licenses are
SVRX Licenses within the meaning of the APA and still find
that SCO was not required to convey the royalties collected under
those licenses to Novell. The instruction thus permits the jury
potentially to ignore the law of the case and must be rejected.

Specific Line Objections:

[1] Novell objects to the portion of the instruction that
states that it is Novell's burden to prove "[t]hat Novell had a
right to possess payments from the SCOsource agreements[.]" Here,
SCO characterizes the issue to be determined as a broad question of
Novell's "right to possess" SCOsource payments, yet the only
remaining issue is the narrow question of whether SCO
collected some amount of money based on the SCOsource agreements
that relates to SVRX. This Court has established as a matter of law
that, if the SCOsource agreements include SVRX rights, SCO was
Novell's agent in collecting SVRX-related payments from those
agreements and duty-

8 (12)

bound to account for them and remit them to Novell. (Order at
89, 96.) Moreover, it is established that SCO's failure to account
for and remit SVRX-related payments from the SCOsource agreements
constitutes conversion. (Id. at 96.) See Haiger v.
Donnelly, 18 Cal. 2d 674, 681 (1941) ("A broker or agent is
ordinarily liable for converting the funds of his principal when he
refuses to account for them upon proper demand."); Fischer v.
Machado, 50 Cal. App. 4th 1069, 1072 (1996) (same). Thus, the
broad question of Novell's "right to possess" SCOsource payments is
not before the jury, and this instruction will only serve to
confuse the jury as to what remains to be decided.

[2] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat SCO
intentionally took possession of those payments from the SCOsource
agreements for a significant period of time[.]" This portion of the
instruction misstates the law, which attaches strict liability to
the tort of conversion: "The foundation of [a conversion] action
rests neither in the knowledge nor the intent of the defendant.
Instead the tort consists in the breach of an absolute duty; the
act of conversion itself is tortious. Therefore, questions of the
defendant's good faith, lack of knowledge, and motive are
ordinarily immaterial." Burlesci v. Petersen, 68 Cal. App.
4th 1062, 1066 (1998).

[3]Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat Novell did not
consent[.]" If the jury determines that SCO collected some amount
of money based on the SCOsource agreements that relates to SVRX,
SCO was unquestionably Novell's agent with respect to that money
and unquestionably breached its duty to act in Novell's interest.
(See Order at 89, 96.) Moreover, SCO premised this action on
the contention that Novell's objections to the SCOsource program
were tortious; it cannot now advance the theory that Novell gave
its "consent." Nor has SCO offered any evidence that Novell gave
its consent to SCO's collection and retention of SVRX Royalties
collected through

9 (13)

the SCOsource program. It is error to give the jury an
instruction on a defense for which there is no more than a
scintilla of support. Farrell v. Klein Tools, Inc., 866 F.2d
1294, 1297 (10th Cir. 1989).

[4] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat Novell was
harmed[.]" If the jury determines that SCO collected some amount of
money based on the SCOsource agreements that relates to SVRX, SCO
was unquestionably Novell's agent with respect to that money and
unquestionably breached its duty to remit it to Novell and there is
no reasonable dispute about harm. (See Order at 89, 96.)
See Heckmann v. Ahmanson, 168 Cal. App. 3d 119, 136 (1985)
(duty of loyalty prevents agent from profiting at expense of
principal). Once the key issue of whether SCO collected
SVRX-related payments under the SCOsource agreements is determined,
therefore, the question of harm is not before the jury. For this
reason, SCO's proposed instruction is confusing and misleading.

[5] Similarly, Novell objects to the portion of the
instruction stating that it is Novell's burden to prove "SCO's
conduct was a substantial factor in causing Novell's harm." As
noted above, if the jury determines that SCO collected and withheld
SVRX-related payments from the SCOsource agreements, there is no
question that SCO was the legal cause of the resulting harm. This
question is not before the jury.

[6] Novell objects to the portion of the instruction
stating that "the parties dispute whether Novell had a right to
possess payments from the SCOsource agreements." This statement is
inaccurate. As explained above, the only thing the parties dispute
with respect to Novell's "right to possess" SCOsource payments is
whether SCO collected some amount of money based on the SCOsource
agreements that relates to SVRX. if so, Novell's right to possess
such payments is established as a matter of law. In suggesting that
the jury needs to re-decide this point, SCO's instruction is
confusing and misleading.

10 (14)

[7] Novell objects to the portion of the instruction
stating that if they jury determines Novell has not proven "that
the payments from the SCOsource agreements were payments that
Novell was entitled to possess under the APA, then you must find
that SCO is not liable for conversion." Once again, SCO here
attempts to obscure what remains a matter of dispute. The key
question of whether SCO collected SVRX-related SCOSource payments
is determinative on this point. SCO's attempts to suggest otherwise
are confusing and misleading.

[8] Novell objects to the portion of the instruction
suggesting that the jury will determine whether or not SCO is
"liable for conversion." This Court has already established as a
matter of law that SCO is liable for conversion of SVRX Royalties
under the Sun and Microsoft agreements because it breached its
fiduciary duties to Novell by failing to account for those
royalties and remit appropriate portions to Novell. (Order at 96
("To the extent that SCO has failed to pass through the appropriate
amount of SVRX Royalties under the 2003 Sun and Microsoft
Agreements to which Novell was entitled, Novell is also entitled to
summary judgment on its Eighth Claim for Relief for conversion");
97 ("SCO's conduct also amounts to a breach of fiduciary duty,
conversion, unjust enrichment, and breach of express contract, all
of which are sufficient 'wrongful conduct' to impose a constructive
trust.").) Accordingly, SCO is "liable for conversion" in this case
whatever the jury's findings on the SCOsource licenses, and it is
misleading to instruct otherwise.

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed jury instruction on the grounds
that it fails to instruct the jury that the Court has already
determined the following issues, each of which is pertinent to the
jury's consideration of this claim:

"The APA expressly created an agency relationship between the
parties with respect to SVRX Royalties." (Order at 89);

11 (15)

"The use of the defined term SVRX License in [Amendment No. 1
of the APA] demonstrates that even incidental licenses of SVRX are
considered an SVRX License." (95);

"SCO was required to account for and pass through to Novell the
appropriate SVRX Royalties according to the SVRX portions of the
2003 Sun and Microsoft Agreements." (96);

"To the extent that SCO has failed to pass through the
appropriate amount of SVRX Royalties under the 2003 Sun and
Microsoft Agreements to which Novell was entitled, Novell is also
entitled to summary judgment on its [claim] for conversion."
(96);

"SCO's conduct also amounts to a breach of fiduciary duty,
conversion, unjust enrichment, and breach of express contract, all
of which are sufficient 'wrongful conduct' to impose a constructive
trust." (97);

12 (16)

NOVELL'S ALTERNATIVE CONVERSION
INSTRUCTION

Conversion is the wrongful taking of property owned by another
in violation of the owner's rights.

You are instructed that SCO is liable for conversion of SVRX
Royalties under the Sun and Microsoft Agreements because it
breached its fiduciary duties to Novell by failing to account for
those royalties and remit appropriate portions to Novell.
Therefore, you need not determine this issue.

Novell claims that SCO is also liable for conversion by failing
to account for and remit other SVRX Royalties due under the APA.
Again, this claim relates to SCO's "SCOsource" agreements. To prove
its conversion claim, Novell must establish only that SCO collected
some amount of money based on the SCOsource agreements that relates
to SVRX. It is undisputed that SCO had a duty to remit such amounts
to Novell. It does not matter whether SCO knowingly or
intentionally kept royalties owed to Novell for purposes of this
claim.

13 (17)

SCO'S PROPOSED INSTRUCTION  BREACH OF
FIDUCIARY DUTY

Novell's Seventh Claim for Relief alleges a breach of fiduciary
duty. An agent owes what is known as a fiduciary duty to its
principal. A fiduciary duty imposes on an agent a duty to act with
the utmost good faith in the best interests of its principal. In
order to prove its claim for breach of fiduciary duty, it is
Novell's burden to prove, by the preponderance of the evidence, all
of the following elements:

[1] 1. That SCO was Novell's agent in collecting
payments from its SCOsource agreements;

[2] 2. That SCO knowingly acted against Novell's
interests in connection with the SCOsource payments;

[3] 3. That Novell did not give informed consent to
Novell's [sic] conduct;

[4] 4. That Novell was harmed by SCO's
conduct.

[5]In this case, the parties dispute whether SCO was
acting as Novell's agent in collecting payments from the SCOsource
Agreements.

[6]You must determine what payments SCO was supposed
to collect for Novell as Novell's agent under the APA, and what
payments it was entitled to collect for itself. Section 4.16 of
the APA provided that SCO was to collect for Novell only royalties
SCO received from SVRX Licenses. You must therefore determine
whether Novell has proven that the SCOsource Agreements constituted
SVRX Licenses as to which Novell retained the rights to royalties.
[7]You must then determine whether Novell has proven by
the preponderance of the evidence that SCO was Novell's agent in
collecting payments from the SCOsource Agreements, or whether SCO
was properly collecting those payments for itself.

[8]If you determine that Novell has not proven by the
preponderance of the evidence that SCO was acting as Novell's agent
in collecting payments from the SCOsource Agreements, then you must
find that SCO is not liable for breach of fiduciary duty. If you
determine that Novell has proven by the preponderance of the
evidence that SCO was acting as Novell's agent in

14 (18)

collecting payments from the SCOsource Agreements, then you
should find that SCO is liable for breach of fiduciary
duty.

15 (19)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

SCO's proposed jury instruction suggests that because the status
of the SCOsource licenses remains to be tried, the parties must
relitigate issues that have already been decided as a matter of law
on summary judgment. In particular, SCO's proposed instruction
suggests that it is still an open issue whether SCO was acting as
Novell's agent in collecting royalty payments that Novell was
entitled to under the APA, and whether this relationship gave rise
to a fiduciary duty. To the contrary, the Court's August 10, 2007
Order established as a matter of law that "[t]he APA expressly
created an agency relationship between the parties with respect to
SVRX Royalties." (Order at 89.) As a result, "SCO was required to
account for and pass through to Novell the appropriate SVRX
Royalties according to the SVRX potions of [the] Agreements."
(Id. at 96.) Accordingly, the only issue for the jury to
determine is whether the SCOsource licenses are also SVRX
licenses.

SCO's proposed instruction does not inform the jury that Court
has already determined that SCO was Novell's agent with respect to
collecting SVRX Royalties, or that the Court has already determined
that SCO was required to account for and pass through SVRX
Royalties, or that the Court has already determined that SCO's
obligations extended to agreements like those with Microsoft and
Sun. Indeed, SCO's proposed instruction leaves open the possibility
that the jury could find that SCOsource licenses are SVRX Licenses
within the meaning of the APA and still find that SCO was
not Novell's agent with respect to those licenses. The instruction
thus permits the jury potentially to ignore the law of the case,
and must be rejected.

Specific Line Objections:

[1] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat SCO was
Novell's agent in collecting payments from its SCOsource
Agreements[.]" SCO characterizes the issue to be determined by the
jury as a broad question of agency, yet the only remaining
issue is the narrow question of whether the SCOsource

16 (20)

agreements include SVRX rights. As Novell's agent with respect
to SVRX Royalties from the Sun and Microsoft agreements, "SCO was
required to account for and pass through to Novell the appropriate
SVRX Royalties according to the SVRX potions of [the] Agreements."
(Id. at 96.) Based on these rulings, if the SCOsource
agreements include SVRX rights, it is established that SCO was
Novell's agent in collecting SVRX-related payments from those
agreements. (See also Motion Hearing, January 23, 2007, at
40:16-23 (admission that relationship was a fiduciary one with
respect to SVRX Licenses); Motion Hearing, June 4, 2007, at
35:24-36:3 (same).) The question of SCO's agency, as such, is not
before the jury, and this instruction will only serve to confuse
the jury as to what remains to be decided.

[2] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat SCO knowingly
acted against Novell's interests in connection with the SCOsource
payments[.]' If the jury determines that the SCOsource agreements
include SVRX rights, SCO was unquestionably Novell's agent with
respect to those rights and required to act in Novell's interest.
(See Order at 89, 96.) See Engalla v. Permanente Med.
Group, Inc., 15 Cal. 4th 951, 977 (1997) ("An agency
relationship is a fiduciary one, obliging the agent to act in the
interest of the principal."); Comm. on Children's Television,
Inc. v. Gen. Foods Corp., 35 Cal. 3d 197, 221 (1983) (fiduciary
must give priority to the best interest of the beneficiary). It
cannot be disputed that SCO did not account for or remit to Novell
royalties from the SCOsource agreements any more than it did for
the Sun and Microsoft agreements. SCO's failing to perform its
fiduciary obligations to Novell as spelled out in the APA must be
construed as knowingly acting against Novell's interest. Once
again, the only remaining question is whether the SCOsource
agreements include SVRX. Put another way, here the jury is not
charged with making any determination about SCO's conduct, and
SCO's proposed instruction will only serve to confuse and mislead
the jurors.

17 (21)

[3] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat Novell did not
give informed consent to [SCO's] conduct[.]" If the jury determines
that the SCOsource agreements include SVRX rights, SCO was
unquestionably Novell's agent with respect to those rights and
unquestionably breached its duty to act in Novell's interest.
(See Order at 89,96.) See Engalla, 15 Cal
4th at 997; Comm. on Children's Television, 35
Cal 3d at 221. Assuming, arguendo, that SCO breached its
duty, there is no evidence that Novell gave its "informed consent"
to this breach. On the contrary, all the evidence adduced in this
litigation on this issue shows that Novell did not so consent.
Because no evidence supports SCO's position on this issue, this
instruction is supported by insufficient evidence and therefore
improper. Farrell, 866 F.2d at 97 (there must be "more than
a mere scintilla of evidence to support an instruction").

[4] Novell objects to the portion of the instruction
stating that it is Novell's burden to prove "[t]hat Novell was
harmed by SCO's conduct." If the jury determines that the SCOsource
agreements include SVRX rights, SCO was unquestionably Novell's
agent with respect to those rights and unquestionably breached its
duty to remit SVRX-related royalties obtained pursuant to the
agreements to Novell. (See Order at 89, 96.) See
Engalla, 15 Cal. 4th at 977 ("An agency relationship
is a fiduciary one, obliging the agent to act in the interest of
the principal."); Comm. on Childrens' Television, 35 Cal. 3d
at 221 (fiduciary must give priority to the best interest of the
beneficiary); Heckmann, 168 Cal. App. 3d at 136 (duty of
loyalty prevents agent from profiting at expense of principal). If
the jury determines that SCOsource agreements include SVRX rights,
then Novell was entitled to those royalties and there can be no
question that SCO's conduct harmed Novell. Once the key issue of
whether the SCOsource agreements include SVRX rights is determined,
therefore, the question of harm is not before the jury. For this
reason, SCO's proposed instruction is confusing and misleading.

18 (22)

[5] Novell objects to the portion of the instruction
stating that "the parties dispute whether SCO was acting as
Novell's agent in collecting payments from the SCOsource
Agreements." This statement is inaccurate. As explained above, the
only thing the parties dispute with respect to agency is whether
the SCOsource agreements include SVRX rights. If so, SCO's agency
relationship to Novell for the purpose of collecting payments from
those agreements is established as a matter of law. In suggesting
that the jury needs to re-decide this point, SCO's instruction is
confusing and misleading.

[6] Novell objects to the portion of the instruction
stating that the jury must determine whether Novell has proven
"that SCO was Novell's' agent in collecting payments from the
SCOsource Agreements, or whether SCO was properly collecting those
payments for itself." The broad question of SCO's agency is not
before the jury, and SCO's repeated attempt to place it before the
jury is confusing and misleading.

[7] Novell objects to the portion of the instruction
stating that, if the jury determines that Novell has not proven
"that SCO was acting as Novell's agent in collecting payments from
the SCOsource Agreements, then you must find that SCO is not liable
for breach of fiduciary duty." Once again, SCO here attempts to
muddy the waters of what remains a matter of dispute. The question
of whether the SCOsource agreements contain SVRX rights puts to
rest, one way or the other, the broader question of SCO's agency
for the purpose of accounting for and remitting SCOsource royalties
to Novell. SCO's attempt to suggest otherwise are confusing and
misleading.

[8] Novell objects to the portion of the instruction
stating that if the jury finds that Novell has proven that SCO
acted as Novell's agent for collection of royalties under the
SCOsource agreements, then it should find that SCO is liable for
breach of fiduciary duty. This Court has already established as a
matter of law that "SCO breached its fiduciary duties to Novell by
failing to account for and remit the appropriate SVRX Royalty
payments to Novell for the SVRX

19 (23)

portions of the Sun and Microsoft Agreements." (Order at 96;
see i. at 97 ("SCO's conduct also amounts to a breach of
fiduciary duty, conversion, unjust enrichment, and breach of
express contract, all of which are sufficient 'wrongful conduct' to
impose a constructive trust.").) Accordingly, SCO is "liable for
breach of fiduciary duty" in this case whatever the jury's findings
on the SCOsource licenses, and it is misleading to instruct
otherwise.

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed jury instruction on the grounds
that it fails to instruct the jury that the Court has already
determined the following issues, each of which is pertinent to the
jury's consideration of this claim:

"The APA expressly created an agency relationship between the
parties with respect to SVRX Royalties." (Order at 89);

"The use of the defined term SVRX License in [Amendment No. 1
of the APA] demonstrates that even incidental licenses of SVRX are
considered an SVRX License." (95);

"SCO was required to account for and pass through to Novell the
appropriate SVRX Royalties according to the SVRX portions of the
2003 Sun and Microsoft Agreements." (96);

"As a matter of law, the court concludes that SCO breached its
fiduciary duties to Novell by failing to account for and remit the
appropriate SVRX Royalty payments to Novell for the SVRX portions
of the 2003 Sun and Microsoft Agreements." (96);

"SCO's conduct also amounts to a breach of fiduciary duty,
conversion, unjust enrichment, and breach of express contract, all
of which are sufficient 'wrongful conduct' to impose a constructive
trust." (97);

20 (24)

NOVELL'S ALTERNATIVE BREACH OF FIDUCIARY DUTY
JURY INSTRUCTION

Novell alleges that SCO breached fiduciary duties to Novell
related to SCO's obligations with regard to SVRX Royalties. In
general, a fiduciary duty is an obligation to act in the best
interests of another. Thus, partners have fiduciary duties to each
other, a trustee has a fiduciary duty to the beneficiaries of the
trust, and an agent has fiduciary duties to its principal.

You are instructed that SCO owed Novell fiduciary duties because
the APA made SCO Novell's agent for collecting SVRX Royalties. As a
fiduciary, SCO was required to act with utmost good faith and to
put Novell's interest above its own on all matters involving SVRX
Royalties. SCO was required to handle the SVRX Royalties with due
care, to account for SVRX Royalties to Novell, and to keep Novell
fully informed as to all matters pertinent to Novell's interest in
the SVRX Royalties. Novell does not need to establish that SCO
breached a contract to show that SCO breached its fiduciary duties
to Novell.

You are further instructed that SCO breached its fiduciary
duties to Novell by failing to account for and remit the
appropriate SVRX Royalty payments to Novell for the 2003 Sun and
Microsoft Agreements. Therefore, you need not determine this
issue.

Novell alleges that, in addition to the Sun and Microsoft
agreements, SCO breached a fiduciary duty by failing to account for
and remit other SVRX Royalties due under the APA, and by failing to
permit Novell to audit its records as required by the APA. Novell's
claims relate to what SCO called "SCOsource agreements" other than
Sun and Microsoft.

To prevail on its breach of fiduciary duty claim as to these
SCOsource agreements, Novell must prove that SCO breached one or
more of its fiduciary duties by failing to account for and remit
SVRX Royalties from these SCOsource agreements or by failing to
permit Novell to audit its SCOsource agreements. You are instructed
that SCO owed Novell the fiduciary duties set forth above
regardless of whether SVRX rights were included in a license for
other types of software, such as UnixWare. You must therefore
determine whether these SCOsource licenses include SVRX rights.

21 (25)

SCO'S PROPOSED INSTRUCTION  UNJUST
ENRICHMENT

[1]Novell's Sixth Claim for Relief alleges that SCO
was unjustly enriched by failing to remit royalties purportedly
owed to Novell.

In order to prove its claim for unjust enrichment, [2]it is Novell's burden to prove, by the preponderance of the
evidence, all of the following elements:

1. That SCO received a benefit; and

2. That SCO retained the benefit at the expense of
Novell.

[3]A "benefit" means something of value. In this
case, the parties dispute whether the payments SCO received from
the SCOsource Agreements were retained at the expense of
Novell.

[4]You must therefore determine what payments Novell
was entitled to possess under the APA, and what payments SCO was
entitled to retain for itself. Section 4.16 of the APA provided
that Novell was entitled to possess only royalties from SVRX
Licenses that licensed the SVRX code. You must determine whether
Novell has proven that the payments from the SCOsource Agreements
constituted payments that Novell was entitled to possess under this
provision of the APA.

[5]If you determine that Novell has not proven by the
preponderance of the evidence that the payments from the SCOsource
Agreements were payments that Novell was entitled to possess under
the APA, then you must find that SCO is not liable for unjust
enrichment. If you determine that Novell has proven by the
preponderance of the evidence that the payments from the SCOsource
Agreements were payments that Novell was entitled to possess under
the APA, then you may find that SCO is liable for unjust
enrichment.

22 (26)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

Novell objects to SCO's proposed instruction on the grounds that
it fails to instruct the jury that the Court has already found that
SCO failed to account for and remit royalties it collected under
the Sun and Microsoft agreements and suggests that the only issue
is whether failure to remit SCOsource licenses resulted in unjust
enrichment. (Order at 96, 97, 100-101.) Rather, as a result of the
Court's summary judgment order, the jury has two tasks: (1) to
determine the amount by which SCO was unjustly enriched by
collection of Sun and Microsoft royalties, and (2) to determine
whether the SCOsource licenses included SVRX Royalties and if so,
the amount by which SCO was unjustly enriched by collection of
SCOsource Royalties. To the extent SCO's proposed instruction fails
to provide the jury with this guidance on its tasks, it is improper
and must be rejected. Sulzer, 358 F.3d at 1366.

Specific Line Objections

[1] Novell objects to the portion of the instruction that
suggests that unjust enrichment is a separate cause of action. In
fact, Novell's "claim" for unjust enrichment is pled as a measure
of the amount of restitution to which Novell is entitled.
See Novell's Amended Counterclaims ΆΆ 135, 173.
Novell is not pursuing unjust enrichment as a separate claim but
rather as a measure of recovery.

[2] Novell objects to the portion of the instruction that
states the "elements" of unjust enrichment in terms of "benefits"
received. The issue in this case addresses a very specific
"benefit": SVRX Royalties to which Novell was due. There is no
dispute that SCO failed to remit royalties for the Sun, Microsoft,
and SCOsource licenses; the only issues are whether Novell is
entitled to the latter, and how much Novell is entitled to for the
first two. Failing to specify the "benefit" at issue would unduly
confuse and mislead the jury regarding its task.

[3] Novell objects to the portion of the instruction that
states that "the parties dispute whether the payments SCO received
from the SCOsource agreements were retained at the

23 (27)

expense of Novell." The true issue in dispute is whether the
SCOsource agreements gave rise to SVRX Royalties. There is
otherwise no dispute that SCO retained the SCOsource payments; if
the SCOsource agreements included SVRX Royalties, they fall within
the Court's determination that Novell is entitled to them under the
APA.

[4] Novell objects to the portion of the proposed
instruction stating that the jury's job is to "determine what
payments SCO was required to remit to Novell under the APA, and
what payments it was entitled to keep for itself." This Court has
already determined that SCO was required under the APA to account
for and remit SVRX Royalties, and has rejected SCO's effort to
narrow that obligation to existing binary agreements. Moreover,
this Court has already determined that the Sun and Microsoft
agreements included royalty payments SCO was required to remit to
Novell under the APA. Suggesting to the jury that it has unfettered
discretion to determine what payments SCO was required to remit to
Novell under the APA is error that must be avoided.

[5] Novell objects to the portion of this instruction
suggesting that the jury will determine whether or not SCO is
"liable for unjust enrichment." This Court has already established
as a matter of law that SCO was unjustly enriched by failing to
account for SVRX Royalties in the Sun and Microsoft agreements.
(Order at 96 ("[t]he court concludes SCO was required to account
for and pass through to Novell the appropriate SVRX Royalties
according to the SVRX portion of the 2003 Sun and Microsoft
Agreements"); 97 ("SCO's conduct also amounts to a breach of
fiduciary duty, conversion, unjust enrichment, and breach of
express contract, all of which are sufficient 'wrongful conduct' to
impose a constructive trust.").) Accordingly, SCO is "liable for
unjust enrichment" in this case whatever the jury's findings on the
SCOsource licenses, and it is misleading to instruct otherwise.
Dillard, 51 F.3d at 915.

24 (28)

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed jury instruction on the grounds
that it fails to instruct the jury that the burden is on SCO, as
Novell's fiduciary for purposes of collecting SVRX Royalties, to
account for the amount of royalties it collected and the amount, if
any, of apportionment. The instruction further fails to instruct
that if apportionment or calculation of the amount is rendered
difficult by SCO's failure to keep adequate records, all doubts
should be resolved against SCO. See Rosenfeld, Meyer &
Susman v. Cohen, 191 Cal. App. 3d 1035, 1051-52 (1987) ("where
a fiduciary has a legal duty to allocate receipts between those in
which its beneficiary has some interest and those in which the
beneficiary has none, and is fully and singularly capable of making
that allocation but fails to do so, a court is justified in calling
upon the fiduciary to bear the burden of differentiation at
trial"); Kennard v. Glick, 183 Cal. App. 2d 246, 250-51
(1960) ("[a]n agent who fails to keep an account raises thereby a
suspicion of infidelity or neglect, creates a presumption against
himself, and brings upon himself the burden of accounting to the
utmost for all that has come into his hands; and in such case every
doubt will be resolved against the agent, and in favor of the
principal"); Leigh v. Engle, 727 F.2d 113, 138-39 (7th Cir.
1984) ("the burden is on the defendants who are found to have
breached their fiduciary duties to show which profits are
attributable to their own investments apart from their control of
the Reliable Trust assets . . . . [W]hile the district court may be
able to make only a rough approximation, it should resolve doubts
in favor of the plaintiffs").

Novell further objects to SCO's proposed jury instruction on the
grounds that it fails to instruct the jury that the Court has
already determined the following issues, each of which is pertinent
to the jury's consideration of this claim:

"The APA expressly created an agency relationship between the
parties with respect to SVRX Royalties." (Order at 89);

25 (29)

"The use of the defined term SVRX License in [Amendment No. 1
of the APA] demonstrates that even incidental licenses of SVRX are
considered an SVRX License." (95);

"SCO was required to account for and pass through to Novell the
appropriate SVRX Royalties according to the SVRX portions of the
2003 Sun and Microsoft Agreements." (96);

"To the extent that SCO has failed to pass through the
appropriate amount of SVRX Royalties under the 2003 Sun and
Microsoft Agreements to which Novell was entitled, Novell is also
entitled to summary judgment on its [claim] for conversion."
(96);

"SCO's conduct also amounts to a breach of fiduciary duty,
conversion, unjust enrichment, and breach of express contract, all
of which are sufficient 'wrongful conduct' to impose a constructive
trust." (97);

"Furthermore, the court concludes, as a matter of law, that the
only reasonable interpretation of the term 'SVRX License' in the
APA is all licenses related to the SVRX products listed in Item VI
of Schedule 1.1(a) to the APA." (100);

"[T]he court concludes, as a matter of law, that the only
reasonable interpretation of all SVRX licenses include no temporal
restriction of SVRX Licenses existing at the time of the APA."
(100-01);

"[T]he court also notes that SCO has a continuing contractual
obligation to comply with the accounting an reporting requirements
set forth in the APA." (101).

26 (30)

NOVELL'S ALTERNATIVE UNJUST ENRICHMENT
INSTRUCTION

You must decide how much compensation Novell is entitled to
based on liability I have already found as well as based on any
additional liability you determine. Novell need not establish that
its business was damaged by SCO's actions. Rather, Novell is
entitled to restitution on the basis that SCO received money that
is rightfully Novell's, and that SCO would be unjustly enriched if
it were allowed to keep that money.

To decide the amount of SCO's unjust enrichment to be awarded to
Novell, you must do the following:

First, as noted, you are instructed that SCO is liable for
breach of fiduciary duty and conversion on account of the Sun and
Microsoft agreements. Here, your task is only to properly apportion
the money SCO received from Sun and Microsoft between the amounts
attributable to SVRX and the amounts attributable to non-SVRX
software. Because SCO was Novell's fiduciary, the burden is on SCO
to establish the portion of the money it received from Sun and
Microsoft that is not attributable to SVRX. If you find that SCO
handled the funds in a way that makes apportioning the amount due
Novell difficult, then you should resolve any doubt in favor of
Novell, up to and including awarding all of the funds to
Novell.

Second, if you find in connection with the other SCOsource
agreements that SCO breached its fiduciary duties to Novell with
respect to SVRX Royalties, or is liable for conversion for such
royalties, then you must similarly apportion the amounts SCO
received between SVRX Royalties and non-SVRX Royalties. Again, if
you find that SCO handled these funds in a way that makes
apportioning the amount due Novell difficult, then you should
resolve any doubt in favor of Novell, up to and including awarding
all of the funds to Novell.

27 (31)

SCO'S PROPOSED INSTRUCTION 
APPORTIONMENT

Novell's Third, Sixth, Seventh, and Eighth claims seek payments
that SCO received [1]under the 2003 Sun and Microsoft
Agreements. It is your responsibility to determine what
portion, if any, of the payments SCO received under the 2003 Sun
and Microsoft Agreements Novell is entitled to.

[2]In deciding what portion, if any, of the Sun and
Microsoft Agreements Novell is entitled to, you can consider only
payments that Novell has proven with reasonable certainty SCO
received for an SVRX License.[3]You must not
include in your calculation any other payments SCO received under
the Sun and Microsoft Agreements, for any other purpose,
including:

(a) Payments, if any, made for the licensing of SCO's
UnixWare product;

(b) Payments, if any, made for the licensing of an additional
copy of the source code to the SVRX products that Sun bought out in
1994; or

(c) Payments, if any, made for any options and releases
unrelated to the licensing of SVRX technology.

[4]If you decide that no portion of the payments SCO
received under the Sun and Microsoft Agreements was received for an
SVRX License, then you must decide that Novell is not entitled to
any payments. If you decide that only a portion of the payments
SCO received from the Sun and Microsoft Agreements constituted a
payment under an SVRX License, then you must determine what portion
of those payments constituted a payment under an SVRX License that
Novell is entitled to receive.

28 (32)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

Novell objects to SCO's proposed instruction on apportionment on
the grounds that it fails to acknowledge or encompass the Court's
summary judgment rulings and their impact on the matters to be
decided by the jury. In particular, the Court has already found
that SCO was Novell's agent for purposes of accounting for and
passing through SVRX Royalties, that SCO breached a fiduciary duty
to Novell in failing to account for or pass through the appropriate
SVRX Royalties under the 2003 Sun and Microsoft agreements, and
that the allocation and accounting for SVRX Royalties is part of
SCO's duties under the APA. (Order at 96.) SCO's fiduciary duty
means that SCO bears the burden of establishing allocation,
particularly because SCO's failure to account for the royalties in
the first instance makes it difficult or impossible to do so now.
See Rosenfeld, 191 Cal. App. 3d at 1051-52 ("where a
fiduciary has a legal duty to allocate receipts between those in
which its beneficiary has some interest and those in which the
beneficiary has none, and is fully and singularly capable of making
that allocation but fails to do so, a court is justified in calling
upon the fiduciary to bear the burden of differentiation at
trial"); Kennard, 183 Cal. App. 2d at 250-51 ("[a]n agent
who fails to keep an account raises thereby a suspicion of
infidelity or neglect, creates a presumption against himself, and
brings upon himself the burden of accounting to the utmost for all
that has come into his hands; and in such case every doubt will be
resolved against the agent, and in favor of the principal");
Leigh, 727 F.2d at 138-39 ("the burden is on the defendants
who are found to have breached their fiduciary duties to show which
profits are attributable to their own investments apart from their
control of the Reliable Trust assets . . . . [W]hile the district
court may be able to make only a rough approximation, it should
resolve doubts in favor of the plaintiffs").

Novell further objects to SCO's proposed instruction as
incomplete so far as it omits the jury's obligation to find and
apportion royalties SCO retained for the SCOsource licenses if the
jury finds that such licenses included SVRX Royalties. Finally,
Novell objects that SCO's

29 (33)

instruction on apportionment is duplicative of its instruction
on unjust enrichment and damages, and as such will unduly confuse
and mislead the jury.

Specific Line Objections

[1] Novell objects to the portion of the instruction that
states that Novell is seeking royalties only under the 2003 Sun and
Microsoft agreements on the grounds that it fails to encompass the
issues to be decided in the case. Novell has claims for any SVRX
Royalties obtained by SCO, but for purposes of trial has narrowed
its claim to SVRX Royalties under the Sun, Microsoft and
SCOsource agreements. To the extent the proposed instruction
purports to narrow the case to Sun and Microsoft royalties, it is
inaccurate.

[2] Novell objects to the portion of the instruction
stating Novell's alleged burden on the grounds that it is
inapposite and confusing. SCO's proposed instruction suggests that
Novell has the burden of proving "to a reasonable certainty" that
payments were received by SCO for an SVRX License. In fact, this
Court has already ruled that SCO was Novell's fiduciary for
purposes of accounting for and remitting SVRX Licenses. As a
result, any difficulty in proving whether royalties collected by
SCO are SVRX Royalties is chargeable to SCO. To the extent the
instruction places the burden of apportionment on Novell, it is in
error. See Rosenfeld, 191 Cal. App. 3d at 1051-52;
Kennard, 183 Cal. App. 2d at 250-51; Leigh, 727 F.2d
at 138-39.

[3] Novell objects to the portion of the instruction that
places undue restrictions on the revenues that can be considered by
the jury for purposes of apportioning royalties collected by SCO on
the grounds that these limitation have no legal or evidentiary
foundation, and on the grounds that they will confuse and mislead
the jury. In particular, the second limitation tells the jury to
exclude "payments, if any, made for the licensing of an additional
copy of the source code to the SVRX products that Sun bought out in
1994." There is no legal basis for excluding this payment; to the
contrary, the Court has already rejected SCO's effort to limit its
royalty obligations to binary code. (Order at 83.) The third
limitation, telling the jury to exclude

30 (34)

"payments, if any, made for any options and releases unrelated
to the licensing of SVRX technology" is redundant; if the options
and releases are unrelated to the licensing of SVRX technology,
then there is no reason to think they would be included as SVRX
Royalties. Finally, the first limitation, telling the jury to
exclude "payments, if any, made for the licensing of SCO's UnixWare
product" is objectionable here, to the extent that it fails to
instruct the jury that the burden is on SCO to differentiate
payments made from SCO's UnixWare product from royalties collected
as SVRX Royalties. As the Court has already found, even licenses
that purport to be for "UnixWare," like the Sun and Microsoft
licenses, may have an SVRX component. (Order at 93.) Moreover,
"even where a customer moves to a UnixWare product, SCO's SVRX
Royalty obligations to Novell can continue unless there is no SVRX
code or only an insignificant amount of SVRX code in the product"
and "[i]t is undisputed that some of the original SVRX code is
included in the Sun and Microsoft Agreements." (Order at 94.)
Accordingly, any instruction that instructs the jury to exclude
payments for UnixWare must also instruct the jury on the criteria
for finding that no SVRX License is included.

[4] Novell objects to the portion of the instruction that
purports to relitigate the issue of whether some portion of
royalties collected from Sun and Microsoft are SVRX Royalties that
must be remitted to Novell. The Court's August 10, 2007 Order has
already determined as a matter of law (1) that the 2003 Sun and
Microsoft agreements were subject to SCO's obligations to account
for and remit SVRX Royalties under the APA, (2) that it is
undisputed that the 2003 Sun and Microsoft agreements included some
of the original SVRX code, (3) SCO breached a fiduciary duty in
failing to account for and remit royalty payments due for the SVRX
portions of the 2003 Sun and Microsoft agreements, (4) SCO is
liable for conversion for failing to pass through the appropriate
SVRX Royalty payments to Novell for the SVRX portions of the
agreements. (Order at 94, 96.) It is no longer open to the jury to
decide that "no portion of the

31 (35)

payments SCO received under the Sun and Microsoft agreements was
received for an SVRX License."

32 (36)

SCO'S PROPOSED INSTRUCTION 
DAMAGES

Novell has alleged that, as a result of SCO's conduct,
[1]it has incurred damages. Under the law,
[2]it is Novell's duty to establish, by the
preponderance of the evidence, all of the facts necessary to
establish that it incurred damages as a result of SCO's
conduct.

In considering whether Novell has proven that it has suffered
damages, you must determine whether [3]Novell has met
its duty to establish, by the preponderance of the evidence, that
it is entitled to any of the payments SCO received under the 2003
Sun and Microsoft Agreements and/or the SCOsource
Agreements.

You must therefore determine [4]whether Novell has
proven what portion of the money SCO received from the Sun and
Microsoft Agreements and/or the SCOsource Agreements was paid for
as an SVRX License as to which Novell retained royalty rights under
the APA. [5]You must not consider any payments made
to SCO under the Agreements for any other purpose,
including:

(a) Payments, if any, made for the licensing of SCO's
UnixWare product;

(b) Payments, if any, made for the licensing of an additional
copy of the source code to the SVRX products that Sun bought out in
1994; or

(c) Payments, if any, made for any options and releases
unrelated to the licensing of SVRX technology.

[6]If you determine that Novell has not established
by the preponderance of the evidence that a portion of the payments
SCO received from the Sun and Microsoft Agreements and/or the
SCOsource Agreements was paid for the licensing of the SVRX code,
then Novell cannot recover damages. If you determine that Novell
has proven by the preponderance of the evidence that a portion of
the payments SCO received from the 2003 Sun and Microsoft
Agreements and/or the SCOsource Agreements was paid for the
licensing of the SVRX code, you should award Novell damages in that
amount.

33 (37)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

Novell objects to SCO's proposed instruction on damages on the
grounds that, as set forth in Novell's motion to strike SCO's jury
trial demand, Novell is not seeking "damages" in this action, but
rather restitution of SCO's unjust enrichment, or a constructive
trust. Novell further objects to SCO's proposed instruction insofar
as it fails to acknowledge or encompass the Court's summary
judgment rulings and their impact on the matters to be decided by
the jury. In particular, the Court has already found that SCO was
Novell's agent for purposes of accounting for and passing through
SVRX Royalties, that SCO breached a fiduciary duty to Novell in
failing to account for or pass through the appropriate SVRX
Royalties under the 2003 Sun and Microsoft agreements, and that the
allocation and accounting for SVRX Royalties is part of SCO's
duties under the APA. (Order at 96.) SCO's fiduciary duty means
that SCO bears the burden of establishing what portion of the money
SCO received was attributable to SVRX, particularly because SCO's
failure to account for the royalties in the first instance make it
difficult or impossible to do so now. See Rosenfeld 191 Cal.
App. 3d at 1051-52 ("where a fiduciary has a legal duty to allocate
receipts between those in which its beneficiary has some interest
and those in which the beneficiary has none, and is fully and
singularly capable of making that allocation but fails to do so, a
court is justified in calling upon the fiduciary to bear the burden
of differentiation at trial"); Kennard, 183 Cal. App. 2d at
250-51 ("[a]n agent who fails to keep an account raises thereby a
suspicion of infidelity or neglect, creates a presumption against
himself, and brings upon himself the burden of accounting to the
utmost for all that has come into his hands; and in such case every
doubt will be resolved against the agent, and in favor of the
principal"); Leigh, 727 F.2d at 138-39 ("the burden is on
the defendants who are found to have breached their fiduciary
duties to show which profits are attributable to their own
investments apart from their control of the Reliable Trust assets .
. . . [W]hile the district court may be able to make only a rough
approximation, it should resolve doubts in favor of the

34 (38)

plaintiffs"). Finally, Novell objects that SCO's instruction on
damages is duplicative of its instruction on unjust enrichment and
apportionment, and as such will unduly confuse and mislead the
jury.

Specific Line Objections

[1] Novell objects to the portion of the instruction that
states that Novell has the burden of proving damages on the grounds
that Novell is not seeking damages in this action, but rather
equitable relief.

[2], [3] Novell objects to the portion of the instruction
that states that "it is Novell's duty to establish, by the
preponderance of the evidence, all of the facts necessary to
establish that it incurred damages as a result of SCO's "conduct"
and to the similar portion referring to "whether Novell has met its
duty to establish, by the preponderance of the evidence, that it is
entitled to any of the payments SCO received." First, the use of
the term "duty" here is improper as a description of the burden
that Novell may have to present or prove facts. Second, and
substantively, Novell objects on the grounds that the instruction
on Novell's burden is inapposite and thus misleading. SCO's
proposed instruction fails to account for the fact that this Court
has already ruled that SCO was Novell's fiduciary for purposes of
accounting for and remitting SVRX Licenses. As a result, any
difficulty in proving whether royalties collected by SCO are SVRX
Royalties is chargeable to SCO. To the extent the instruction
places the burden of apportionment on Novell, it is in error.
See Rosenfeld, 191 Cal. App. 3d at 1051-52; Kennard,
183 Cal. App. 2d at 250-51; Leigh, 727 F.2d at 138-39.

[3], [4], [6] Novell objects to the portion of the
instruction that purports to relitigate the issue of whether some
royalties collected from Sun and Microsoft are SVRX Royalties that
must be remitted to Novell. The Court's August 10, 2007 Order has
already determined as a matter of law (1) that the 2003 Sun and
Microsoft agreements were subject to SCO's obligations to account
for and remit SVRX Royalties under the APA, (2) that it is
undisputed that the 2003

35 (39)

Sun and Microsoft agreements included some of the original SVRX
code, (3) SCO breached a fiduciary duty in failing to account for
and remit royalty payments due for the SVRX portions of the 2003
Sun and Microsoft agreements, (4) SCO is liable for conversion for
failing to pass through the appropriate SVRX Royalty payments to
Novell for the SVRX portions of the agreements. (Order 94, 96.) It
is no longer open to the jury to decide that no "portion of the
payments SCO received from the Sun and Microsoft Agreements was
paid for the licensing of the SVRX code."

[5] Novell objects to the portion of the instruction that
places undue restrictions on the revenues that can be considered by
the jury for purposes of apportioning royalties collected by SCO on
the grounds that these limitations have no legal evidentiary
foundation, and on the grounds that they will confuse and mislead
the jury. In particular, the second limitation tells the jury to
exclude "payments, if any, made for the licensing of an additional
copy of the source code to the SVRX products that Sun bought out in
1994." There is no legal basis for excluding this payment; to the
contrary, the Court has already rejected SCO's effort to limit its
royalty obligations to binary code. (Order at 83.) The third
limitation, telling the jury to exclude "payments, if any, made for
any options and releases unrelated to the licensing of SVRX
technology" is redundant; if the options and releases are unrelated
to the licensing of SVRX technology, then there is not reason to
think they would be included as SVRX Royalties. Finally, the first
limitation, telling the jury to exclude "payments, if any, made for
the licensing of SCO's UnixWare product" is objectionable here, to
the extent that it fails to instruct the jury that the burden is on
SCO to differentiate payments made from SCO's UnixWare product from
royalties collected as SVRX Royalties. As the Court has already
found, even licenses that purport to be for "UnixWare," like the
Sun and Microsoft licenses, may have an SVRX component. (Order at
93.) Moreover, "even where a customer moves to a UnixWare product,
SCO's SVRX Royalty obligations to Novell can continue unless there
is no SVRX code or only an insignificant amount

36 (40)

of SVRX code in the product" and "[i]t is undisputed that some
of the original SVRX code is included in the Sun and Microsoft
Agreements." (Order at 94.) Accordingly, any instruction that
instructs the jury to exclude payments for UnixWare must also
instruct the jury on the criteria for finding that no SVRX License
is included.

37 (41)

SCO'S PROPOSED INSTRUCTION  INCIDENTAL
SVRX LICENSE

The APA sets forth different rules for payments that SCO
receives from SVRX Licenses that it enters into (as explained in
Section 4.16) and for payments that SCO receives from UnixWare
Licenses that it enters into (as explained in Schedule 1.2(b)). The
parties dispute which of these royalty provisions applies to the
2003 Sun and Microsoft Agreements and/or the SCOsource Agreements
which you have received in evidence. The parties agree that which
provision applies depends on whether the portion of SVRX code
licensed in each agreement was "incidental" to the UnixWare
License.

With regard to each agreement, then, you must decide whether
that agreement was an SVRX License, or a UnixWare License that
licensed SVRX code incidentally.

If you determine that Novell has not proven by the
preponderance of the evidence that the SVRX portion, if any, of the
Sun and Microsoft Agreements and/or the SCOsource Agreements was
not incidental (or was more than incidental) to the UnixWare
license being provided, you must then find that SCO was not
obligated to remit to Novell any royalties from the 2003 Sun and
Microsoft Agreements and/or the SCOsource Agreements. If you
determine that Novell has proven that the SVRX portion, if any, of
the Sun and Microsoft Agreements and/or the SCOsource Agreements
was not incidental to the UnixWare license being provided, you must
then determine the amount of royalties SCO was obligated to remit
to Novell from the Sun and Microsoft Agreements or the SCOsource
Agreements.

Novell objects to SCO's proposed instruction on "incidental SVRX
license" in its entirety on the grounds that it ignores the law of
the case and offers a factually and legally erroneous
interpretation of the APA, as well as a mistaken account of what
the parties "agree" on and what they "dispute."

First, the Court specifically addressed this theory in the
summary judgment ruling. SCO argued, with respect to the Sun and
Microsoft licenses, that "the 2003 Sun and Microsoft Agreements are
licenses for UnixWare which license SVRX only incidentally." (Order
at 93.) The Court undertook an extensive review of Section 4.16,
Section 1.2 and Schedule 1.2(b), as well as Amendment 1, and
concluded that the "incidental" language was irrelevant to SCO's
royalty obligations: "Although [Amendment No. 1 Ά J] allows
SCO to enter into new SVRX Licenses and amendments of SVRX Licenses
incidental to its license of UnixWare, nothing in the language
releases SCO from the obligation to remit 'all royalties, fees, and
other amounts due' under those SVRX licenses. The use of the
defined term SVRX License in this section demonstrates that even
incidental licenses of SVRX are considered an SVRX License."
(Order at 95.) Accordingly, and directly contrary to the proposed
instruction, the Court concluded that "SCO was required to account
for and pass through to Novell the appropriate SVRX Royalties
according to the SVRX portions of the 2003 Sun and Microsoft
Agreements." (Order at 96.) SCO may not resubmit this issue to the
jury.

Second, and closely related, there is nothing in the APA and its
amendment that supports SCO's argument that it is entitled to
retain "incidental" SVRX Royalties. To the contrary, Section
4.16(b) and its amendment, relied on by SCO, pertain to SCO's right
to "amend, modify

39 (43)

or waive any right under or assign any SVRX license." These
provisions do not pertain to SCO's royalty obligations, much less
to SCO's obligations to account for these revenues.

Third, the proposed instruction offers an erroneous account of
what the parties "agree" and what they "dispute." Novell does not
"agree" that "which [royalty] provision applies depends on whether
the portion of SVRX code licensed in each agreement was
'incidental' to the UnixWare license."4 To the contrary, Novell sought summary
judgment on this point, arguing that SCO was required to account
for and pass through SVRX Royalties associated with the Sun and
Microsoft agreements, regardless of what proportion of those
agreements related to SVRX code and what portion related to
UnixWare. (See, e.g., Novell's Opposition to SCO's
Cross-Motion for Summary Judgment on Novell's Third, Sixth,
Seventh, Eighth and Ninth Claims for Relief, Docket No. 221, filed
January 16, 2007, at pages 11-13.) Novell prevailed on summary
judgment on this point. (Order at 93-96.) Novell has never
indicated or suggested that it agreed with SCO's theory; to the
contrary, Novell considers SCO's theory to be unsupported by the
APA and its amendments.

40 (44)

SCO'S PROPOSED INSTRUCTION  AMOUNT OF
DAMAGES

Novell also bears the burden of proving by the preponderance
of the evidence the amount of damages it suffered with reasonable
certainty.

In considering the amount of damages, you must determine
whether the payments SCO received from the 2003 Sun and Microsoft
Agreements and/or the SCOsource Agreements constitute payments that
Novell was entitled to under the APA. If you determine that a
portion of the payments SCO received from the Sun and Microsoft
Agreements and/or the SCOsource Agreements was for the licensing of
the SVRX code as enumerated in Section 4.16 of the APA, you must
determine what portion of the payments from the Sun and Microsoft
Agreements and/or the SCOsource Agreements Novell has proven was
paid for licensing the SVRX code.

In your calculation, you can only include payments that
Novell has proven with reasonable certainty were paid for the
licensing of the SVRX code. You must not include in your
calculation any other payments SCO received under the Sun and
Microsoft Agreements, for any other purpose, including:

(d) Payments, if any, made for the licensing of SCO's
UnixWare product;

(e) Payments, if any, made for the licensing of an additional
copy of the source code to the SVRX products that Sun bought out in
1994; or

(f) Payments, if any, made for any options and releases
unrelated to the licensing of SVRX technology.

41 (45)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Novell objects to SCO's proposed jury instruction on "amount of
damages" in its entirety on the grounds that the proposed
instruction is entirely duplicative of SCO's proposed instructions
on "damages," "apportionment," and "unjust enrichment."

Novell incorporates herein by reference its general and specific
objections to SCO's Proposed Instructions on Damages, Apportionment
and Unjust Enrichment.

Novell's Fourth Claim for Relief seeks a declaratory judgment
that SCO had no authority to enter into the Microsoft, Sun, and
SCOsource Agreements because it was obligated to seek Novell's
approval prior to entering into those Agreements. A declaratory
judgment is a declaration that a party was or is required to do
something under the terms of a contract.

Section 4.16 of the APA provides that SCO shall not enter into
an SVRX License without the prior written consent of Novell.

Amendment No. 1 to the APA provides that SCO shall have the
right to enter into amendments of the SVRX Licenses without
Novell's consent as may be incidentally involved through its
rights to sell and license UnixWare software.

In order to prove its claim for declaratory judgment, it is
Novell's burden to prove, by the preponderance of the evidence,
that SCO did not have the authority to enter into the Sun and
Microsoft and/or the SCOsource Agreements without Novell's prior
approval. Novell must therefore prove both of the following:

[1] (1) that the Sun and Microsoft Agreements
and/or the SCOsource Agreement were SVRX Licenses that
required Novell's prior approval; and

(2) that the Sun and Microsoft Agreements and/or the SCOsource
Agreements were not UnixWare Licenses that contained an incidental
SVRX license, which does not require Novell's approval.

In this case, [1]the parties dispute whether the Sun
and Microsoft Agreements and/or the SCOsource Agreements
were SVRX Licenses or whether they were UnixWare licenses
that contained an incidental SVRX license.

If you determine that Novell has not proven by a preponderance
of the evidence [1]both that the Sun and Microsoft
Agreements and/or the SCOsource Agreements (1) were SVRX
Licenses that required Novell's approval and (2) were not
UnixWare Licenses that contained an

43 (47)

incidental SVRX license that does not require Novell's approval,
then you must find that Novell is not entitled to its requested
declaratory judgment. If you determine that Novell has proven by
the preponderance of the evidence [1] both that the Sun
and Microsoft Agreements and/or the SCOsource Agreements (1)
were SVRX Licenses that required Novell's approval and (2) were
not UnixWare licenses that contained an incidental SVRX license
that does not require Novell's approval, then you should find that
Novell is entitled to its requested declaratory judgment.

44 (48)

NOVELL'S OBJECTION TO PROPOSED INSTRUCTION

Introduction

SCO's proposed jury instruction suggests that the parties must
relitigate issues that have already been decided as a matter of law
on summary judgment. In particular, SCO's proposed instruction
suggests it is still an open issue whether these agreements are
SVRX Licenses. To the contrary, the Court's August 10, 2007 Order
established as a matter of law that "it is undisputed that the 2003
Sun and Microsoft Agreements have some SVRX component;" that "even
incidental licenses of SVRX are considered an SVRX License"; and
that "SVRX License" refers to "the entire set of agreements
relating to the licensing of SVRX code." Order at 93, 95, 86. Based
on the Sun and Microsoft agreements' classification as SVRX
Licenses under the APA, this Court further determined as a matter
of law that SCO was liable for breach of fiduciary duty,
conversion, unjust enrichment and breach of contract. Id. at
96-97. Thus, the question of whether the Sun and Microsoft
agreements "are SVRX Licenses" subject to the provisions of the APA
is not before the jury.

With respect to the Sun and Microsoft agreements, the only issue
that remains to be tried in this claim is whether those SVRX
Licenses were incidental to SCO's rights to sell and license
UnixWare under section 4.16(b) and Amendment 1 of the APA. If the
jury determines these SVRX Licenses were more than "incidental" to
SCO's UnixWare rights, Novell is entitled to its requested
declaratory relief. Yet SCO's proposed instruction does not help
define the key term "incidental" Nor does it inform the jury that
the Court has already determined that Sun and Microsoft agreements
are SVRX Licenses. The instruction thus permits the jury
potentially to ignore the law of the case, and must be
rejected.

Finally, SCO's proposed instruction fails to instruct the jury
regarding the legal effect of this Court's determination that SCO
was Novell's agent and fiduciary in matters relating to SVRX
Royalties. As a result of that relationship, SCO was required to
resolve doubts in favor of its obligation to inform Novell of
transactions involving SVRX licenses.

45 (49)

Specific Line Objections:

[1] Novell objects to the portions of the instruction
characterizing the issue of whether "the Sun and Microsoft
Agreements . . . were SVRX Licenses" as a matter in dispute to be
proved by Novell. As explained above, this Court's August 10, 2007
Order makes clear that the Sun and Microsoft agreements are to be
considered SVRX Licenses under the terms of the APA. (Order at 86,
93, 95-97.) Thus, the question of whether the Sun and Microsoft
agreements "are SVRX Licenses" is not before the jury. All the jury
must determine regarding the Sun and Microsoft licenses for
purposes of this claim is whether those agreements' undisputed
licensing of SVRX was "incidental" to the licensing of UnixWare
within the meaning of the APA.

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed instruction on the grounds that
it fails to provide any instruction to the jury on the construction
of the contract term "incidental." Indeed, SCO's proposed
instruction provides no guidance whatsoever on this key disputed
term. See Weicking v. Phoenix Mut. Life Ins. Co., 116 F.2d
90, 93 (7th Cir. 1940) (affirming trial court's instruction
defining key term in insurance policy); Kocher v. Creston
Transfer Co., 166.F.2d 680, 685 (3d Cir. 1948) ("Lack of
essential definition is reversible error"; reversing for new trial
because instruction failed to define "enigmatic terms" and "left to
the jury to speculate upon the circumstances" that would create
agency).

Novell further objects to SCO's proposed instruction on the
grounds that it fails to instruct the jury that SCO had a fiduciary
duty as Novell's agent with respect to SVRX Licenses. As a result,
SCO had an obligation to put Novell's interest above its own with
respect to these licenses, and to assure that any new SVRX License
or any amendment, modification or waiver of an SVRX License would
not harm Novell's interest. Engalla v. Permanente Med. Group,
Inc., 15 Cal. 4th 951, 977 (1997) ("An agency
relationship is a fiduciary one, obliging the agent to act in the
interest of the principal."); Comm. on Children's Television,
Inc. v Gen. Foods Corp., 35

46 (50)

Cal. 3d 197, 221 (1983) (fiduciary must give priority to the
best interest of the beneficiary). SCO thus had a legal obligation
to resolve doubts about whether a license was "incidental" or not
in favor of Novell, and to keep Novell informed of its licensing
activities. Failure to inform the jury of this legal relationship
and its effect on the parties' rights and obligations is erroneous
and misleading.

47 (51)

NOVELL'S ALTERNATIVE LACK OF AUTHORITY
DECLARATION INSTRUCTION

Novell seeks a determination that SCO did not have the authority
under the APA to enter into the Sun, Microsoft, and other
"SCOsource" agreements.

The APA states that SCO shall not, and shall not have the
authority to, amend, modify or waive any right under or assign any
SVRX License without the prior written consent of Novell. It also
states that, notwithstanding this prohibition, SCO shall have the
right to enter into amendments of the SVRX Licenses "(i) as may be
incidentally involved through its rights to sell and license
UnixWare software." It goes on to state that SCO shall not, and
shall have no right to, enter into new SVRX Licenses except in the
situation specified in (i) of the preceding sentence or as
otherwise approved in writing in advance by Seller on a case by
case basis.

Under these provisions, the issue for you to decide is whether
the Sun agreement, the Microsoft agreement, and SCO's other
"SCOsource" agreements were "incidental" to the licensing of
UnixWare.

"Incidental" means being likely to ensue as a minor consequence
or occurring without intention or calculation.

You are instructed that SCO had a fiduciary duty as Novell's
agent with regard to SVRX licenses. SCO thus had fiduciary duties
to Novell to put Novell's interest above its own and ensure that
any new SVRX license or any amendment, modification, or waiver of
an SVRX license would not harm Novell's interest.

If, as SCO contends, the Sun agreement, the Microsoft agreement,
and SCO's other "SCOsource" agreements were merely incidental to
UnixWare licensing, then SCO had the authority to enter into these
agreements as long as doing so would not conflict with its duties
as a fiduciary of Novell to protect Novell's interest in the SVRX
licenses. If, on the other hand, the SVRX licensing was more than
incidental, then SCO lacked the authority to enter into these
agreements. Because SCO owed Novell fiduciary duties as to SVRX
Licenses, any doubt should be resolved against SCO.

Novell's Fourth Claim for Relief also seeks a declaratory
judgment that SCO breached the APA by entering into the 2003 Sun
Agreement without Novell's prior approval.

Section B of Amendment No. 2 to the APA provides [1]that the parties must follow certain procedures for their joint
management of any potential transaction with an SVRX licensee which
concerns a buy-out of any such licensee's royalty
obligations.

[2]Amendment No. 1 to the APA provides that SCO shall
have the right to enter into amendments of the SVRX Licenses
without Novell's consent as may be incidentally involved through
its rights to sell and license UnixWare software.

In order to prove its claim for declaratory judgment, it is
Novell's burden to prove, by the preponderance of the evidence,
that SCO did not have the authority to enter into the Sun Agreement
without Novell's prior approval. Novell must therefore prove that
the Sun Agreement was itself a buy-out [2, 3]of Sun's
SVRX royalty obligations, and not a UnixWare License that relates
to a prior 1994 agreement in which Sun's buy-out was
granted.

In this case, the parties dispute whether the Sun Agreement
constituted a buy-out [2, 3]of Sun's SVRX royalty
obligations or whether it was UnixWare Agreement that related to a
prior 1994 agreement in which Sun's buy-out was granted.

If you determine that Novell has not proven by the preponderance
of the evidence both that the Sun Agreement was itself a buy-out
[2, 3]of Sun's SVRX royalty obligations and not an
agreement that related to a prior agreement in which such a buy-out
was granted, then you must find that Novell is not entitled to
its requested declaratory judgment. If you determine that Novell
has proven by the preponderance of the evidence that the Sun
Agreement was itself a buy-out [2, 3]of Sun's royalty
obligations and not an agreement that related to a prior agreement
in which such a buy-out was granted, then you should find that
Novell is entitled to its requested declaratory judgment.

49 (53)

NOVELL'S OBJECTIONS TO PROPOSED
INSTRUCTION

Introduction

SCO's proposed jury instruction suggests that the parties must
relitigate an issue that has already been decided as a matter of
law on summary judgment, and avoids the central issue the jury must
decide in relation to this claim. In particular, SCO's proposed
instruction suggests it is still an open issue whether the 2003
agreement between Sun and SCO concerned Sun's SVRX Royalty
obligation, or whether the Sun agreement was actually a UnixWare
license. Yet, as discussed in Novell's general objection to SCO's
jury instruction regarding the lack of the authority declaration,
the Court's August 10, 2007 Order established as a matter of law
that the Sun agreement is as SVRX License. (Order at 86, 93,
95-97.) Thus, the question of whether the Sun agreement involved
SVRX Royalties is not before the jury.

At the same time, the proposed instruction barely mentions the
contractual provisions governing the central issue underlying this
claim: whether the 2003 Sun agreement "concerns a buyout" of an
existing SVRX license. If it did, then SCO was obligated to inform
Novell of the proposed buyout and to involve Novell in the
negotiations. (See Amendment 2, Ά B.) This claim thus
turns on whether the Sun agreement "concerns a buyout" of an
existing SVRX License, not on whether the agreement was an
agreement for UnixWare. The latter issue is not before the jury;
SCO's proposed instruction does not inform the jury that the Court
has already determined that the Sun agreement is an SVRX License.
The instruction thus permits the jury potentially to ignore the law
of the case, and must be rejected.

Finally, SCO's proposed instruction fails to instruct the jury
regarding the legal effect of this Court's determination that SCO
was Novell's agent and fiduciary in matters relating to SVRX
Royalties.

Specific Line Objections:

[1] Novell objects to the portion of the instruction
summarizing the requirements of Section B of Amendment 2 and
writing these off as "certain procedures." In fact, Section B
of

50 (54)

Amendment 2 provides that if either party becomes aware of "any
potential transaction with an SVRX licensee which concerns a
buy-out of any such licensee's royalty obligation," that party is
to inform the other. Amendment 2 further requires SCO to involve
Novell in any negotiations with such licensees and requires mutual
consent by SCO and Novell to any proposals made to such licensees.
Because the jury is being asked to determine whether there was
compliance with these provisions, it would be grossly misleading to
fail to instruct the jury specifically on those provisions.

[2] Novell objects to the portions of the instruction
invoking Amendment 1 and instructing the jury that its task is to
determine whether the 2003 Sun agreement is "a UnixWare Agreement
that related to a prior 1994 Agreement in which Sun's buy-out was
granted." SCO's effort to recast this issue in terms of whether the
Sun agreement is incidental to a UnixWare license under paragraph J
of Amendment 1 to the APA misinforms the jury on the issue to be
tried. This claim seeks a declaratory judgment that SCO was
required to comply with the provisions of Amendment 2 of the APA.
Amendment 2 specifically provided that it was being entered
"notwithstanding the provisions of Article 4.16 Sections (b) and
(c) of the Agreement" (which by then included Amendment 1).
Moreover, Amendment 2 provided that its provisions applied to any
"potential transaction with an SVRX licensee" which
concerns a buy-out. On its face, this provision does not conflict
with the issue of whether a transaction was "incidental" to a
UnixWare license. SCO's effort to recast this dispute will confuse
and mislead the jury.

[3] Novell objects to the portions of the instruction
stating that Novell must prove that the Sun agreement concerned
"Sun's SVRX Royalty obligations, and not a UnixWare License." As
explained above, the Court's August 10 Order makes clear that the
Sun agreement must be considered an SVRX License. Thus, the
question of whether the Sun agreement concerned SVRX is not before
the jury.

51 (55)

Objection Based on Inadequacy of Instruction

Novell objects to SCO's proposed instruction on the grounds that
it fails to specify the provisions of Amendment 2, the provision of
the agreement that Novell is seeking declaratory judgment on. The
jury cannot be expected to determine whether SCO has breached the
agreement without an explanation of what the agreement
requires.

Novell further objects to SCO's proposed instruction on the
grounds that it fails to instruct the jury that SCO had a fiduciary
duty as Novell's agent with respect to SVRX Licenses. As a result,
SCO had an obligation to put Novell's interest above its own with
respect to these licenses, and to assure that any new SVRX License
or any amendment, modification or waiver of an SVRX License would
not harm Novell's interest. Engalla v. Permanente Med. Group,
Inc., 15 Cal. 4th 951, 977 (1997) ("An agency
relationship is a fiduciary one, obliging the agent to act in the
interest of the principal."); Comm. on Children's Television,
Inc. v. Gen. Foods Corp., 35 Cal. 3d 197, 221 (1983) (fiduciary
must give priority to the best interest of the beneficiary). SCO
thus had a legal obligation to resolve doubts about whether a
license was a "potential transaction with an SVRX licensee which
concerns a buy-out" in favor of disclosure to Novell. Failure to
instruct the jury on the effect of this legal relationship on the
parties rights and obligations is erroneous and misleading.

52 (56)

NOVELL'S ALTERNATIVE SUN DECLARATION
INSTRUCTION

Novell seeks a determination that SCO breached the APA, as
amended by Section B of Amendment 2, when it entered into the Sun
Agreement.

Section B of Amendment 2 of the APA was signed approximately
thirteen months after the APA and amended section 4.16 of the
agreement. Amendment 2 provides that if either party becomes aware
of "any potential transaction with an SVRX licensee which concerns
a buy-out of any such licensee's royalty obligation" that party is
to inform the other. Amendment 2 further requires SCO to involve
Novell in any negotiations with such licensees and requires mutual
consent by SCO and Novell to any proposals made to such
licensees.

Under these provisions, the issue for you to decide is whether
the 2003 agreement between Sun and SCO amending and restating the
1994 license between Novell and Sun is a transaction "which
concerns a buyout" of Sun's royalty obligation.

You are instructed that SCO had a fiduciary duty as Novell's
agent with regard to SVRX licenses. SCO thus had fiduciary duties
to Novell to put Novell's interest above its own and ensure that
any amendment of an SVRX license would not harm Novell's interest.
It is also undisputed that SCO did not inform Novell of the
negotiations that lead to the 2003 Sun agreement and did not seek
or obtain Novell's consent to enter into that agreement.

If you find that the 2003 Sun agreement "concerns a buyout" of
Sun's royalty obligation, then SCO was required to involve Novell
in the negotiations for that agreement and obtain Novell's consent.
If, on the other hand, you find that the 2003 Sun agreement did not
"concern a buyout," SCO was entitled to go forward so long as it
met the other conditions of section 4.16 of the APA as outlined in
the previous instruction. Because SCO was Novell's fiduciary with
respect to the SVRX licenses, you should resolve doubts in favor of
Novell.

It appears that this instruction is being proffered for use in
the event that the Court grants SCO's motion for reconsideration or
clarification, filed August 31, 2007. Novell will brief its
opposition to that motion separately, and reserves its rights to
object to specific portions of this proposed instruction if it
appears that the Court is inclined to let SCO proceed on this
theory.

A determination whether the SCOsource agreements licensed SVRX
"incidentally" to UnixWare is not significant here, but is key to
Novell's claim seeking a declaration that SCO lacked authority to
enter into the Sun, Microsoft and SCOsource Agreements. (See
Novell's Objection to Proposed Instruction on Lack of Authority
Declaration.) SCO has the legal authority to enter into licenses
that license SVRX incidental to UnixWare. In such circumstances, it
must nevertheless remit SVRX Royalties resulting from those
licenses. "Incidental" is quite relevant to the first inquiry
(legal authority to enter into a license) and irrelevant to the
second (obligation to apportion revenue).